A critical appraisal Of Amway China's e-commerce strategy

E-COMMERCE SYSTEM ASSIGNMENT

A critical appraisal

Of

Amway China’s e-commerce strategy

COMP 5211

Pu Zhang P03091008

Amway China, a subsidiary corporation of ALTICOR will restart there e-business in china from 2004.Mr Yang CIO of Amway America Asia Area said to "IT TIME" that Amway China will start e-business in 32 cities in china. Amway put over 100 million Yuan in the IT field from 2000 to 2003 and the new annual budget will be 40 million. This traditional direct selling corporation found that combine their direct selling model with e-commerce will make their business into a new stage. I will make a critical appraisal which base on the strategy that they adopted.

1. Build an independent e-business website.

In 1999, ALTICOR established an independent e-business website Quixtar in ord to make the customer's order and payment via internet. This makes a great success in America. So Amway China also creates a website for internet order, in charge of e-business .They also updata the website frequently and spend a lot of money in the hardware and software build.

But there are something which can't be ignored, e-business always be considered as a reason which will reduce the profit by sellers, this contradiction in direct selling field is very evidently. Establish a independent e-business website will let the direct seller fell restless, but with many-faceted adjustment, set apart different customers will consolidate more and more direct sellers, make them fell more confidence about e-business. And we can also sell other corporation's Products in our website. This will not only make more choices for customers but also use other corporation’s selling system to compensate the disadvantages of their own system.

In Amway’s commerce model, e-business isn't a separate part, it combines with the other parts of Amway’s strategy. In business, if you want to make an order on the website you must have a member of Amway’s introduction, otherwise you can only view the information of the product. As same as traditional direct selling model, the middleman will get corresponding reciprocation. When Amway start their e-business they also make a many-faceted adjustment and set apart different customers So that they didn’t lost the relationship with the other corporation.

Amway didn't abandon traditional tele, fax even tele message besides ...

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Amway didn't abandon traditional tele, fax even tele message besides internet, they use every ways to extend customer's extent. They call this composite e-business strategy. This pragmatic and elastic approach make Amway get most advantages of e-business and avoid hurt to the other direct selling system. This approach makes a very success in America, but this will not work in China because of the different social contexts. In china people don't use to buy products via tele , fax and tele message, if Amway adopt composite e-business strategy in china they must surmount many problems and it will take a long time to deal with this. So the best way of solving this is to create a chinese model direct selling system.

2. Combine Chinese model direct selling with e-business

Amway Corporation is a direct selling corporation which has more than 40 year's history. But in china because of the situation of the direct selling, Chinese government banned direct selling in April 1998. So Amway is force to change its selling way. Amway adopt "shop selling + employ salesman". Right now Amway holds more than 110 monopolistic shops and have more than 70 thousands salesman in more than 30 provinces in china. Since Amway decide to restart e-business in china, they found that if they want to mix this Chinese style direct selling model and e-business together there may have many conflicts. So Amway China didn't copy the America way. They make vip-customer system. Normal Customer can't buy products in the website, they must become a vip-customer for the qualification of buying products. But if you want to be a vip-customer you must sign a contract with the salesman, the customer who sign with the specific salesman will belong to this salesman.

Obviously Amway China ignores a fact: in a strict way, Amway China isn't a traditional direct selling corporation anymore, they must face a problem that how to mix a new selling model and e-business. The problem is very clear: For achieve a "shop selling + employ salesman" e-business Amway China spend a huge sum investment in foundation facilities, If go back to traditional direct selling model, the investment which spend before will drop into water, but if continue the existing selling way, advantages of e-business like high efficiency and convenience will hardly reach. And Amway China make 1 million order forms per day, because of the direct selling system, all forms must send to a region center, and then go to Guangzhou headquarters. In there the data will be analyze and send to America then get the feedback immediately. To achieve this needs a fast and fine net, otherwise the seller in stores will spend a huge time in the transport of data, headquarter also can't get the newest business data.

Although Amway China use a limitary customer system for the payment, (For example as a member of Amway, you can deposit some money first or take credit.) a useful payment system is still a important part of e-business, Amway China wants to hold e-business in 32 cities in china, they must think over the local payment system at first. As a corporation who has more than 50% customers using the global internet payment system, how to achieve this in china will be a most difficult task. At the moment, less than 1% sales volume are using e-business. Amway china must use their own preponderance to solve this problem, how to create a first-class support system and how to use their huge direct selling team will be the main points.

China is a big country, because of e-ordering how to deal with the physical distribution problem became a problem. During the strategy Amway China builds more than 110 stores in 32 different provinces, these shops will be store center, staple center even training center. Amway China also makes cooperation with other physical distribution company. This problem will not be a big obstruction.

3. New e-business advertisement strategy

Amway China didn't take any advertisement before, only a few image advertisements. So that the Chinese people can hardly see Amway's advertisement from TV or Newspaper before 2000, they can only know Amway from a direct seller. With Amway China start to change their manage model and enter IT field, they make a big adjustment. But their strategy also out of the ordinary. They use specific products to bring along the whole image.

Since Amway China decide to start e-business, Amway Nutrlite's(The main healthy food product) advertisement is broadcasting in the most expensive Chinese TV station CCTV. From Jan 2001 Amway start to broadcast an advertisement which let the FuMingxia(the greatest diving player in china) to be the spokesperson. At the same time they also put a plane image advertisement on many media. On Sep 2002, Amway employ the Olympic gold medal winner TianLiang to be the image spokesperson. Amway China also support many sport events. Expect media advertisement Amway also make some investments in public welfare. From 1998 Amway China participates in contribution for more than 100 times, the amount is over 45 million Yuan this make a good figure in china. Amway's advertisement strategy bring them many unexpected gains, the celebrity of Amway grows very fast in china, this hardly happened in the other area in the world.

Because of Amway China didn’t make any advertisement before 2001, the most of Chinese people don’t know what is Amway, They take the concentrated advertisement strategy won’t let people have enough time to digest them. This will make people feel hard to accept. And for e-business Amway should make many online advertisements, So that people will know this system more clearly. At this stage , take a step by step advertisement strategy will be better.